Congress cuts SUV tax deduction

November 23, 2010

Tax legislation before President Bush would reduce the cost of any SUV eligible for small business expensing from $100,000 to $25,000. Bush indicated he would sign the measure. The threshold rose from $25,000 to $100,000 last year. Pickup trucks still would qualify for the $100,000 deduction, as would any SUV exceeding 14,000 gross pounds. Any change would take effect upon Bush signing the bill, meaning SUVs delivered afterwards would merit the lesser deduction. "Dealers have used the ($100,000) tax break as a marketing tool in their advertising to generate sales," said AIADA spokesman Ed Patru, and analysts predict a spike in SUV sales before Bush acts. But that prediction is not unanimous. Jeff Schuster, a forecaster for J.D. Power and Associates, said, "We don't expect this (tax) change to have a noticeable effect on the overall SUV market." The bill also would limit the write-off amount on cars donated to charity. Benefactors now may cite Kelley Blue Book values to as a guide to the value of their donated vehicles. Under the proposed law, a vehicle's deduction value would be the amount at which the charity sells it. Also of interest to dealers, technology-neutral tax credits for consumers who buy alternative fuel vehicles is not in the pending law. Sen. Don Nickles (R-Okla.), who led the charge to close the so-called "SUV Loophole," charged "enormous abuse" of the $100,000 provision because so many SUVs qualified for the deduction. Automotive industry spokesmen countered that the tax incentive was a boon to the small business sector. Nevertheless, the AIADA said Nickles will be "dearly missed" when he retires in January after 20 years in the Senate. Nickles has been an unwavering supporter of estate tax repeal and a strong proponent of legal reform.